Wall Street gains as earnings gains during the season offset concerns about the economy

  • Meta adds ~14% by advertising AI as digital ads improve prospects
  • Eli Lilly raised its full-year profit forecast
  • Amazon.com Boosts Session Profits After Late Earnings
  • Indexes up: Dow 1.57%, S&P 1.96%, Nasdaq 2.43%

April 27 (Reuters) – The tech-savvy Nasdaq led a rally on Wall Street on Thursday as a strong quarterly report from Facebook’s parent Meta Platforms Inc overshadowed concerns about slowing US economic growth.

Meta (META.O) shares closed 13.9% after hitting their highest level in more than a year after the company forecast quarterly revenue above estimates and CEO Mark Zuckerberg said artificial intelligence is driving traffic to its services and boosting sales ads.

As a result, the S&P 500 Communications Services Index (.SPLRCL) hit 5.5%, making its biggest single-day percentage gain since February 2022. Along with Meta, it gained momentum thanks to Alphabet Inc (GOOGL.O), which posted bullish results earlier this week, while Comcast (CMCSA.O) was up 10.3% after impressive financial results on Thursday.

“Facebook’s earnings last night, and big-cap profits in general, continue to surprise positively,” said Mona Mahajan, senior investment strategist at St. Louis.

“There were high expectations for profits as these sectors were already outperforming, so there was some hesitation about whether they would disappoint. In fact, many of these business models have proven quite resilient,” she said. “The other part of the story is that many cash-rich companies are issuing buyback programs.”

After the end of the regular session, it was up 4.6% Amazon.com Inc (AMZN.O) saw an increase of another 7.6% in after-hours trading when it reported quarterly revenue ahead of its post-close estimate.

The Dow Jones Industrial Average (.DJI) rose 524.29 points, or 1.57%, to 33,826.16, the S&P 500 (.SPX) gained 79.36 points, or 1.96%, to 4,135.35, and the Nasdaq Composite (.IXIC) added 287.89 points or 2.43% to 12,142.24.

While the S&P and Dow posted their biggest daily percentage gains since January 6, the Nasdaq boasted the biggest one-day gain since March 16.

Of the 11 major sectors of the S&P 500 Index, Communications Services posted the biggest gains, followed by Consumer Goods (.SPLRCD), which was up 2.8%, while Energy (.SPNY), which was up just 0.5%, was the smallest gainer.

Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance in Charlotte, North Carolina, noted Thursday’s economic figures were less positive than earnings reports.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., April 17, 2023. REUTERS/Brendan McDermid

This showed that US economic growth slowed more than expected in the first quarter as the pick-up in consumer spending was offset by companies cutting inventory investment.

“All things considered, this morning’s macro data was very negative. With so much market growth after this data, it shows that investors are looking beyond the macro… Earnings reports have been very good. It’s definitely not irrational enthusiasm,” Zaccarelli said.

Earnings expectations for the first quarter improved dramatically, with analysts predicting a 2.4% year-on-year drop in S&P 500 earnings from a forecast 5.1% decline at the start of the earnings season, according to analyst estimates compiled by Refinitiv.

Even if slower GDP growth reflected a stunt from weak inventory investment, the Federal Reserve is expected to raise interest rates by another 25 basis points next week.

“Overall, the economy seems to be slowing down. We believe that as the Fed continues with another rate hike next week, we will start to see a further slowdown. Our baseline scenario is a mild economic downturn in the second half,” said Mahajan of Edward Jones.

Eli Lilly and Co (LLY.N) posted gains of 3.7% after raising its full-year profit forecast, while Comcast surged, beating its quarterly profit estimates, driven by broadband demand and increased theme park attendance.

EBay Inc (EBAY.O) rose 5.1% after the e-commerce firm forecast revenue for the current quarter above forecasts.

AbbVie Inc (ABBV.N) fell about 8% after the drugmaker missed quarterly revenue estimates for its newer therapies, while heavy machinery maker Caterpillar Inc (CAT.N) fell as a flat order backlog signaled demand could reach the top.

Progressive emissions outpaced NYSE declines by a ratio of 3.26 to 1; on the Nasdaq, a ratio of 1.89 to 1 favored the movers.

The S&P 500 recorded 19 new 52-week highs and 4 new lows; The Nasdaq Composite recorded 41 new highs and 200 new lows.

10.77 billion shares changed hands on the US stock exchanges compared to the last 20 session average of 10.41 billion.

Reporting by Sruthi Shankar in Bengaluru Editing by Vinay Dwivedi

Our standards: Thomson Reuters Trust Principles.

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